Last night, the Wall Street Journal reported that FCC Chairman Tom Wheeler is revising his proposal for new network neutrality rules.

Initial reactions have been mixed. TechCrunch called the revised proposal “a non-fix”—“the same stuff as before, written down with a different color pen.” Others seemed more optimistic.

Here are our thoughts.

Good: The Chairman is asking the right questions.

The Notice of Proposed Rulemaking will ask specific questions on reclassification.

What the WSJ reports:

“Mr. Wheeler’s language will also invite comments on whether broadband Internet service should be considered a public utility, which would subject it to greater regulation. […] ‘The new draft clearly reflects the public input the commission has received,’ one of the FCC officials said, noting that the proposal seeks specific comment on the benefits of reclassifying broadband as a utility. ‘The draft is explicit that the goal is to find the best approach to ensure the Internet remains open and prevent any practices that threaten it.’”

What this means:

The Wall Street Journal suggests that in addition to focusing on Section 706 of the Telecommunications Act as a basis for new network neutrality rules, the upcoming Notice of Proposed Rulemaking (NPRM) will seriously explore a second option for adopting network neutrality rules—Title II of the Communications Act. This is a huge step in the right direction from the state of play three weeks ago—keeping reclassification “on the table” but out of the NPRM. This is what networkneutralityproponents (includingone of us) have been pushing for, so this is a big success.

But the devil is in the details. For example, to ensure that reclassification does not result in onerous regulation, the FCC should immediately forebear from applying Title II provisions that are not necessary to protect consumers. If the agency is serious about exploring all of the options, it needs to ask which rules it should forebear from, if it opts for reclassification.

The NPRM will ask whether pay-to-play access fees should be banned.

What the WSJ reports:

“The [FCC] official said the draft would also seek comment on whether such agreements, called ‘paid prioritization,’ should be banned outright.”

What this means:

Over the past three weeks, many users, start-ups, Internet companies, investors, academics, and Senators have asked the Chairman to reconsider his support for pay-to-play access fees. They voiced their disapproval, and the revised NPRM will give them a chance to make their case. This is a step in the right direction.

Bad: The Chairman is proposing the same (bad) rules.

The proposed rules will not ban pay-to-play access fees—despite the suggestion that fast and slow lanes are history.

What the WSJ reports:

“The head of the Federal Communications Commission is revising proposed rules for regulating broadband Internet, including offering assurances that the agency won’t allow companies to segregate Web traffic into fast and slow lanes.

The new language by FCC Chairman Tom Wheeler to be circulated as early as Monday is an attempt to address criticism of his proposal unveiled last month that would ban broadband providers from blocking or slowing down websites but allow them to strike deals in which content companies could pay them for faster delivery of Web content to customers. [. . .]

In the new draft, Mr. Wheeler is sticking to the same basic approach but will include language that would make clear that the FCC will scrutinize the deals to make sure that the broadband providers don’t unfairly put nonpaying companies’ content at a disadvantage, according to an agency official.

The official said the draft would also seek comment on whether such agreements, called ‘paid prioritization,’ should be banned outright, and look to prohibit the big broadband companies, such as Comcast Corp. and AT&T Inc. from doing deals with some content companies on terms that they aren’t offering to others.”

What this means:

Despite opening up the NPRM to dissenting voices on the question of pay-to-play access fees, the substance of the Chairman’s proposal hasn’t changed. The proposed rules still allow paid prioritization. And although the Wall Street Journal’s lead paragraph suggests that fast and slow lanes are history, paid prioritization allows for exactly that—a faster lane for those who pay.

Though we haven’t yet seen the FCC’s proposal, it seems that the Chairman is considering requiring ISPs to offer a baseline level of service to applications, content, and services that don’t pay up. So instead of an Internet with a slow lane and a fast lane, the new proposal might result in an Internet that offers a “not-so-fast, but not totally crappy lane” to applications that don’t pay and a “faster lane” to those that do.

Internet companies that pay so that their traffic is faster or is not counted against the bandwidth cap have a competitive advantage. This is one of the key policy problemswith access fees. Simply improving the quality of the baseline service does not remove that problem, because the quality differential between paying and non-paying applications remains.

So the proposal still allows paid prioritization. In a way, that’s not surprising. If the Chairman wants to adopt network neutrality rules under Section 706, he must allow pay-to-play access fees, if the rules are to be upheld in court. Verizon v. FCC, the decision that struck down the FCC’s Open Internet Rules in January, explicitly requires this: The decision ruled that banning (or effectively banning) paid prioritization violates the Communications Act prohibition on imposing common carrier rules on entities that—like ISPs—have not been classified as telecommunications service providers. Any network neutrality rules that banned paid prioritization or presumptively banned prioritization would run into the same legal problem.

According to the Wall Street Journal, the rules will ensure that any paid prioritization deals do not “unfairly disadvantage” non-paying companies, and that large ISPs will have to offer the same terms to all interested applications, content, and services.

But the Chairman can’t deliver on this, because requiring ISPs to make the same terms available to everybody is impossible under Section 706. Forcing carriers to treat like entities alike is the essence of common carrier rules. To be upheld under Section 706, any rules need to “leave sufficient ‘room for individualized bargaining and discrimination in terms,’” or they will “run afoul of the statutory prohibitions on common carrier treatment.” (Verizon v. FCC, p. 61, citing Cellco, 700 F.3d at 548.)

More fundamentally, allowing access fees is the wrongpolicychoice. Users, entrepreneurs, and investors are concerned that allowing access fees will substantially harm application innovation and free speech—and they said as much over the past three weeks. Requiring ISPs to make any enhanced services available to every application that is interested—as the FCC Chairman proposes—will not solve these problems; only a ban on access fees will.

Let’s wait and see: The Chairman proposes an ombudsman to advocate on behalf of start-ups.

What the WSJ reports:

“Mr. Wheeler’s updated draft would also propose a new ombudsman position with ‘significant enforcement authority’ to advocate on behalf of startups, according to one of the officials. The goal would be to ensure all parties have access to the FCC’s process for resolving disputes.”

What this means:

The proposal for an ombudsman seems to be designed to address start-ups’ and investors’ concerns that they may not be able to protect themselves against access fees and discrimination under the Chairman’s proposed non-discrimination rule. It’s great to see that the Chairman is listening to these concerns.

The rules proposed by the Chairman last month would ban “commercially unreasonable” pay-to-play access fees and discrimination. Whether discrimination is commercially reasonable would be determined by the FCC after the fact based on a vague, multi-factor test that, according to relevant precedent, must leave sufficient room for individualized discrimination among similar services. Start-ups and investors are concerned that such a rule will not provide them with any certainty that they are protected from discrimination. Additionally, the costs required to litigate the correct interpretation of the factors and their application to the facts of the case will be prohibitive for start-ups that have few, if any lawyers and small legal budgets.

Without more details, it is hard to evaluate whether an Ombudsman would help. While an Ombudsman might make it easier for start-ups to navigate the process, it does not make the rules any more predictable.

More fundamentally, the Chairman’s proposal addresses the symptoms instead of the root cause of the problem. The root cause is that the standard is vague and unpredictable. Any non-discrimination rule adopted based on Section 706 will be afflicted with these problems. But there is a much simpler fix. A bright-line non-discrimination rule that bans discrimination against applications or classes of applications would provide certainty and lower the costs of regulation. It would also make it feasible for start-ups, non-profits, and users to navigate the process, removing the need for an ombudsman.

Summary: A significant step in the right direction, but still a long way to go.

Supporters of network neutrality have spoken out. The Chairman has listened. If the Wall Street Journal is correct, the upcoming Notice of Proposed Rulemaking will ask the right questions, giving everybody—users, start-ups, Internet companies, investors, public interest groups, non-profits, academics, ISPs—an opportunity to make their case. That is a significant improvement, and it’s how the process should work.

Substantively, however, the Chairman’s proposal hasn’t really changed. It still allows pay-to-play access fees. It still proposes a non-discrimination rule with a vague standard—a rule that creates high costs of regulation, does not provide certainty to market participants, and tilts the playing field in favor of large, established companies that can pay lots of lawyers and expert witnesses and afford long and costly proceedings at the FCC.

If we want to protect the Internet as a platform for free speech, application innovation, and economic growth, we need to ban pay-to-play access fees and adopt a bright-line non-discrimination rule that bans discrimination against applications or classes of applications. Users, entrepreneurs, investors, and public interest groups have already moved the debate in the right direction, getting reclassification off the table and into the NPRM. If we want an open Internet and the rules necessary to preserve it, we have to continue to make our voices heard and work hard to educate and convince the FCC, the White House, and members of Congress. The future of the Internet depends on it.

Wednesday’s press reports of the new network neutrality rules proposed by FCC Chairman Wheeler have been met with anger and confusion. According to the Wall Street Journal, “[r]egulators are proposing new rules on Internet traffic that would allow broadband providers to charge companies a premium for access to their fastest lanes. […] [T]he proposal would […] allow providers to give preferential treatment to traffic from some content providers, as long as such arrangements are available on ‘commercially reasonable’ terms for all interested content companies. Whether the terms are commercially reasonable would be decided by the FCC on a case-by-case basis.”

The paperback and Kindle versions of Internet Architecture and Innovation have been released. More information about the book can be found here. There’s a page of reviews, including reviews from Lawrence Lessig, Marvin Ammori, and Brad Burnham. The book is available on Amazon.com and on Amazon’s international websites.

Over the past ten years, the debate over “network neutrality” has remained one of the central debates in Internet policy. Governments all over the world have been investigating whether legislative or regulatory action is needed to limit the ability of providers of Internet access services to interfere with the applications, content and services on their networks.

The precise contours of a non-discrimination rule have important implications: Non-discrimination rules affect how the core of the network can evolve, how network providers can manage their networks, and whether they can offer Quality of Service.[1]

On Monday, I published a white papertitled Network Neutrality and Quality of Service: What a Non-Discrimination Rule Should Look Like. It discusses the relationship between network neutrality, non-discrimination rules and Quality of Service in more detail. The paper:

* Provides the first detailed analysis of the Federal Communications Commissions’ non-discrimination rule and of its implications for network providers’ ability to manage their networks and offer Quality of Service;

* Offers the first in-depth analysis of the relationship between network neutrality and Quality of Service; and

* Proposes a non-discrimination rule that policy makers should adopt around the world – a rule that the FCC adopted at least in part.

The paper is relevant to several ongoing policy debates. Earlier this month, the FCC announced the members of its Open Internet Advisory Committee. The Committee will focus on issues addressed in the FCC’s Open Internet rules, such as reasonable network management practices and technical standards. The question of how the FCC’s non-discrimination rule affects Quality of Service and other network management practices will feature prominently in these discussions. The legal appeal of the Open Internet Order focuses in part on the substantive merits of the FCC’s Open Internet rules, including the merits of its non-discrimination rule. And whether the FCC wins or loses the legal appeal of the Open Internet Order, the question of which, if any, network-discriminations require legal action will remain relevant for years to come. Across the Atlantic, the European Commission and the member states are still exploring what set of network neutrality rules, if any, they should adopt. As part of that effort, the group of European Regulators for Electronic Communication Networks and Services (BEREC) in June started a consultation focused on various aspects of the relationship between network neutrality and Quality of Service – the very topics rigorously addressed in this white paper.

Two weeks ago, various news outletsreported that Verizon Wireless’s new Galaxy Nexus phone, an Android device that went on sale last Thursday, will not support Google Wallet, Google’s mobile payment application. Based on what we know from press reports, it seems that Verizon Wireless is violating the open-devices and open-applications conditions in its legal licenses for part of the 700 MHz spectrum (the so-called “C-Block”) over which the company’s LTE network operates. There is, however, great uncertainty about what exactly is going on.

Today, I wrote a letter (pdf, Scribd version) to the Federal Communications Commission asking the Commission to investigate the situation as quickly as possible and send a signal to the market – innovators, consumers, and licensees – that the openness conditions will be enforced. The letter explains what we know about the facts, why Verizon’s behavior violates the openness conditions, why this violation matters, and what the FCC should do.

This is an important case that will have implications not only for the mobile payments market, but also for any application or service potentially available on a mobile network:

First, Verizon’s behavior hurts Verizon customers, a full 35% of the mobile market, who are unable to use the very first mobile payment technology based on near-field communications that has come to market. These consumers are unable to use this application to pay for goods and services instead of using cash or a plastic card, and are unable to take advantage of the other features Google Wallet offers.

Second, Verizon’s behavior hurts competition in the emerging, potentially huge market for mobile payments technologies and associated services. While the market is nascent today, analysts expect that by 2015, $56.7 billion will be exchanged in mobile payment transactions. Verizon has an incentive to undermine competition in mobile payments, and to eliminate any competitor’s first-mover advantage, as it has partnered with AT&T and T-Mobile to launch a competing payment service called ISIS sometime next year.

Third, Verizon’s actions hurt innovation, in mobile payments or even in any other mobile technology. They do so by shaking innovators’ and investors’ confidence that there will remain one significant part of the wireless Internet in which they can offer their applications or devices without fear of blocking and discrimination by carriers hoping eventually to offer competing products. Innovators and investors are already concerned about the lack of strong network neutrality rules for the mobile Internet. If even Google, one of the nation’s largest corporations, can be blocked by the one wireless carrier that is subject to strong openness conditions, every mobile innovator and investor in the country will know that they are at the mercy of the carriers.

Finally, Verizon’s conduct undermines the Commission’s general approach towards mobile Internet openness by dismantling the protections for one part of the spectrum on which the FCC’s “incremental” approach to regulation in this space is built. Without enforcement, the openness conditions are effectively moot. Verizon violated these conditions earlier this year when it blocked tethering applications. Now it is blocking Google Wallet. This emerging pattern of disregard for its license conditions challenges the FCC to follow through on its pledges in the Open Internet Order to enforce the openness conditions in the 700 MHz band and to monitor the mobile Internet space for abuses by licensees.

Thus, to protect users and innovators in the mobile payments market and in mobile broadband markets more generally and preserve the Commission’s approach towards mobile Internet openness, swift action is needed.

The more detailed analysis is available in the letter (if you have read this post, you can begin on p. 2, Section “What is going on”). You can read the letter as a pdf here, on Scribd, or read it (without footnotes) below.

Read the rest of Is Verizon Wireless illegally blocking Google Wallet? It’s time for the FCC to investigate

According to recent news reports, Verizon Wireless has asked Google to disable tethering applications in Google’s mobile application store, the Android Market. Tethering applications allow users to use laptops or other devices over their mobile Internet connection by attaching them to their smart phones.

In early June, Free Press filed a complaint with the FCC alleging that this behavior violates the openness conditions that govern the use of the part of the 700 MHz spectrum over which Verizon Wireless’s LTE network operates. The FCC seems to have designated the proceeding as a restricted proceeding under its ex parte rules, which means that the public will not be invited to comment on the issues raised by Free Press’s complaint.

Today, I asked the FCC to open up the proceeding for public comment. (The full text of the letter is here (pdf) and copied below.) The questions raised by the complaint are too important to be decided without public participation:

Read the rest of Public Interest Requires Public Input: Verizon/Android Tethering

Since Julius Genachowski, the chairman of the FCC, circulated his proposal for network neutrality rules to the other commissioners on December 1, Commissioner Copps and Commissioner Clyburn, the two other Democratic commissioners, had been negotiating with the chairman over improvements to the order. Since the two Republican commissioners had made clear that they would not back any network neutrality proposal, a rejection by Copps (or Clyburn) would have killed the proposal.

When the FCC published the text of the order on Thursday afternoon, it became clear how important these negotiations have been. While Commissioners Copps and Clyburn did not get the exact protections for users and innovators they had asked for, they managed to improve the chairman’s original proposal quite a bit. In particular, the text of the order

• sets out important principles that will guide the commission’s interpretation of the non-discrimination rule and the reasonable network management exception;

• explicitly bans network providers from charging application and content providers for access to the network providers’ Internet service customers;

• stops just short of an explicit ban on charging application and content providers for prioritized or otherwise enhanced access to these customers (this second practice is often called “paid prioritization”); and

• keeps alive the threat of regulation with respect to the mobile Internet.

Read the rest of The FCC’s Open Internet Rules – Stronger than You Think

[This is the second of two posts about the FCC’s proposal for Open Internet rules. The first post is available here.]

Since I posted the letter by Zediva, an online video company, that describes what the current Open Internet proposal would mean for them and how the proposal should be improved to protect them and other innovators, many have asked me about the broader lessons from Zediva’s story. Others have asked for a bit more detail about the proposed improvements to the rules.

What Zediva’s story teaches us about network neutrality

1. Concerns about discrimination impede application innovation today. Thus, the FCC needs to act now. As the Chairman’s current proposal shows, he understands this with respect to wireline networks, but thinks we can wait and see how the wireless ecosystem evolves. After all, he says, it is “evolving rapidly.” But the idea that waiting has no costs is wrong. Waiting to extend meaningful protections to wireless will allow networking technologies to evolve in discriminatory ways that may be difficult to change later on. As the story of Zediva shows, the lack of protections will immediately have a dampening effect on innovators’ inclination to dedicate the next few years of their life to a wireless application (and on potential investors’ willingness to fund these efforts). The ongoing network neutrality debate motivated network providers’ to stay away from discrimination in order not to fuel the debate. An order that explicitly determines that only the blocking of a restricted set of applications, content and services should be prohibited at this time may fundamentally change this calculus. After all, if the FCC thinks this type of behavior is o.k., why not engage in it?Skype’s experience (pdf, p. 7) in Sweden underscores this point: Until last year, mobile operators in Sweden generally allowed the use of Skype over the mobile Internet. But since the Swedish regulator decided at the beginning of this year that rules that require network providers to disclose any blocking or discrimination are all that’s needed to protect innovators and users, both leading mobile operators have introduced restrictions on users’ ability to use Skype.

Read the rest of The FCC’s Open Internet Proposal – Lessons from Silicon Valley

[This is the first of two posts about the FCC’s proposal for Open Internet rules. The second post is available here.]

On December 1, the chairman of the FCC proposed a set of rules designed to protect the open Internet. He would like the commission to adopt this proposal at its open meeting on December 21. Since then, many have posted their evaluations of the proposal.Some unequivocally support the proposal. Some acknowledge they would have preferred a different solution, but think this is an acceptablecompromise. A final group of commenters (which includes academics, publicinterestorganizations, organizationsthat rely on the open Internet for their work, investors, and companies) can be summarized as follows: “We are glad that the chairman has decided to act. However, the chairman’s proposal needs to be improved to adequately protect users and innovators.”

Why do innovators and users need protection? If a network provider blocks or discriminates against an application I want to use, I cannot use the Internet in the way that is most valuable to me. If a network provider restricts access to content I am interested in, my ability to educate myself, contribute to discussions of the subject and make informed decisions will be limited. Ideally, open Internet rules would ban this type of discriminatory behavior and provide an easy mechanism for users to ask the FCC to stop it. In the absence of good rules, users just have to live with it.

If an application is blocked, it cannot reach its users and the application developer cannot reap its benefits. In the absence of meaningful protections, there is nothing the application developer can do about this. And concerned about the threat of discrimination, innovators (or potential investors) may decide not to pursue innovative ideas. Thus, without meaningful network neutrality rules, we will get less application innovation. And since applications, services and content are what makes the Internet useful to us, an Internet without meaningful network neutrality rules will be less useful to us in the future.

I’m sure you have heard that a lack of meaningful network neutrality rules harms start ups and reduces application innovation before. But for many, it sounds like an abstract theoretical concern. Yesterday, a start up from Silicon Valley called Zediva filed a letter with the FCC that explains what the Chairman’s current proposal would mean for them.

The letter does a great job of showing how different proposals for network neutrality rules can provide very different protections for innovative start ups and where the current proposal needs to be improved, so I asked Zediva for permission to post it here.

Read the rest of Start-Up Video Company Asks FCC to Improve Open Internet Proposal

In the book’s section on “The Generativity Principle and the Limits of End-to-End Neutrality,” Zittrain calls for a new “generativity principle” to address the Internet’s security problem and prevent the widespread lockdown of PCs in the aftermath of a catastrophic security attack: “Strict loyalty to end-to-end neutrality should give way to a new generativity principle, a rule that asks that any modifications to the Internet’s design or to the behavior of ISPs be made where they will do the least harm to generative possibilities.” (p. 165)

Zittrain argues that by assigning responsibility for security to the end hosts, “end-to-end theory” creates challenges for users who have little knowledge of how to best secure their computers. The existence of a large number of unsecured end hosts, in turn, may facilitate a catastrophic security attack that will have widespread and severe consequences for affected individual end users and businesses. In the aftermath of such an attack, Zittrain predicts, users may be willing to completely lock down their computers so that they can run only applications approved by a trusted third party.[1]

This argument relies heavily on the assumption that “end-to-end theory” categorically prohibits the implementation of security-related functions in the core of the network. It is not entirely clear to me what Zittrain means by “end-to-end theory.” As I explain in chapter 9 of my book, Internet Architecture and Innovation (pp. 366-368), the broad version of the end-to-end arguments [2](i.e., the design principle that was used to create the Internet’s original architecture) does not establish such a rule. The broad version of the end-to-end arguments provides guidelines for the allocation of individual functions between the lower layers (the core of the network) and the higher layers at the end hosts, not for security-related functions as a group.

Read the rest of Do we need a new generativity principle? – Comments on Zittrain’s The Future of the Internet (II)